Monday, November 9, 2009

New Delhi: In a major development today in efforts to start Islamic Banking system in India, Union Finance Minister Pranab Mukherjee assured a delegation of Indian Centre for Islamic Finance that he would soon discuss the feasibility of interest-free Islamic banking system in India with Reserve Bank of India Governor.

To discuss about the feasibility of interest-free Islamic banking in India, a delegation headed by H Abdur Raqeeb, General Secretary, Indian Centre for Islamic Finance (ICIF), New Delhi, met Pranab Mukerjee today at his home in Kolkata, and submitted a memorandum to him.

After meeting with Mukherjee, Abdur Raqeeb told “The Finance Minister went through the 3-page memorandum and keenly read the recommendations of Raghuram Rajan committee on Financial Sector Reforms - CFSR recommendations on Interest-free banking which says: the Committee recommends that measures be taken to permit the delivery of interest-free finance on a larger scale, including through the banking system. This is in consonance with the objectives of inclusion and growth through innovation. The Committee believes that it would be possible, through appropriate measures, to create a framework for such products without any adverse systemic risk impact.”

He noted down that Interest-free Banking is not only for Muslims but for all. In Malaysia 40% customers are Chinese, who are Non-Muslim and In Britain 20% of customers are Non-Muslims. He also noted Vatican has recommended Islamic finance to western Banks for its emphasis on ethical investments and being socially responsible investment and an alternative to the conventional banking.

Finance Minister was informed about the decision of the Government of Kerala which had launched an Islamic investment company with Rs.1000 crore after the feasibility report of Ernst & Young and has plan to turn it to a Global Islamic bank after prevailing upon RBI to amend its Banking regulations.
Among the five options provided in the memorandum (Options of GOI) issuing directions and administrative guidelines, creating a subsidiary and going for an Act of Parliament also attracted his attention and he took note of it.

“FM said that he is going to meet RBI governor next week and will discuss with him on this issue. He also said that he will be visiting Saudi Arabia and will be available in the second week of November and then a meeting can be arranged with the secretaries and officials of Banking Department of Finance Ministry to interact with ICIF,” Abdur Raqeeb said.

Saturday, September 26, 2009

Abu Muhammad' Ali Ibn Abu 'U mar Ahmad Ibn Said Ibn Hazm al-Qurtubi al-Andalusi, or more commonly referred to as Ibn Hazm, was born on the last day of Ramadan 384 AH / Nov. 994 AD in Cordoba (Qurtabah), Spain or Andalus at that time. His family's origins are quite obscure in terms of confirmed records. But it is widely accepted that his family originated from the village of Manta Lisham in the district of Niebla.

lbn Hazm's family was of notable status and wealthy position. The family claimed decadency from a Persian client of Yazid, the brother of Muawiyah, the first of the Umayyad dynasty rulers in Syria.lbn Hazm's father, Abu 'Umar Ahmad attained a high position in the administrative hierarchy, holding the rank of a wazir for aI-Mansur and his son aI-Muzaffar, a father and son who ruled efficiently in the name of the Caliph Hisham II.

However, the period during which Ibn Hazm lived was a period of decisive crises for IsIam in Andalusia. Among others, political conflicts against the Slavs caused negative effects for the family of Ibn Hazm. Ibn Hazm himself faced several political and military escapades.

Despite the fluctuations in the political stability, Ibn Hazm was to follow his father's footsteps as a wazir for three different occasions. Firstly, he became a wazir to 'Abd aI-Rahman IV al-Murtada, an Umayyad claimant to the throne. He also became a wazir to 'Abd aI-Rahman V al-Mustazhir and finally, he became a wazir again under Hisham al-Mu'tad.

Ibn Hazm was not involved in state administration throughout his life. A point came when he entered a semi-retirement situation, hence devoting his efforts towards intellectual work, teaching and writing various works. In 456 AH, he died in his village in Manta Lisham, near Seville.

As a personality of his times, Ibn Hazm attained respect as one of the greatest thinkers in the Arab-Muslim civilization. He proved to be a forceful litterateur, historian, philologist, rhetoricist, jurist, philosopher and theologian. The highly educative and exposing environment that accompanied the family stature gave him a thorough education. As a result, he was well-informed on all the main currents of thought, and productivity, breadth of learning and sound mastery of the Arabic language and fundamental tools of scholarship.

Several factors may be listed as to how and why Ibn Hazm could elevate to a high degree of scholarship and leadership, leading him to be endowed with the position of al-Imamah:

Possessing personal traits that are essential for the molding of a great scholar: strength and rigour of memory, sharpness in thought and words, and highly commendable powers of observation and analysis.

Active participation as a wazir in public affairs and administration and, military and political concerns, while subsequently undergoing the hardened aspects of such experiences. Ibn Hazm thus spoke with soundness of thought and richness of experience.

Positively reacting to his opposition by bearing upon himself, the personal discipline of ensuring that he should be widely knowledgeable of his opposition, thus allowing him to counter their criticisms in a more effective way. Hence, the virtue of striving to be more prepared than one's adversaries.

Major Works

With the demise of Ibn Hazm, his son Abu Rafi' reported that Ibn Hazm had completed as many as 400 works, comprising 80,000 sheets. These works encompass subjects such as jurisprudence, logic, history, ethics, comparative religion and theology. However, less than 40 of these works still exist. A list of the more famous works of Ibn Hazm is presented in the appendix to this chapter.

Thoughts of Economic Relevance

Ibn Hazm is an example of what can be referred to as of the total 'ulama - that is, those whose expertise in many issues of the human life are not restricted to that of conceptual juristic viewpoints, but rather are able to provide an Islamic-based opinion and rationale on the more mundane concerns, out of their true expertise and not merely out of their status as 'ulama.

Broadly discussing, four commonly highlighted economic concerns of Ibn Hazm may be projected to illustrate his "total" concern of the economic aspects of Muslims during his time. These are:

Basic needs and poverty

Zakah

Taxes

Land tenure systems

Basic Needs and Poverty

Ibn Hazm listed four forms of needs which make up the essentials of a basic standard of living for a human being: food, drink, clothing and shelter.

Each should satisfy the necessary conditions (as delineated by Islam). The food and drink should be sufficient for the provision of health and energy. The clothing should be sufficient to cover the aurat (parts of the Muslim's body that must be concealed from the non-mahram) and suitable for both the hot and cold seasons, and for rainy conditions. The shelter should be such that it protects the person from effects of the weather and provides a reasonable degree of privacy.

The question of who should bear the responsibility of ensuring the satisfaction of these basic needs must obviously be met by the state. However, Ibn Hazm emphasized also the role to be played by the rich, especially in helping out the needs problem prevalent within their regions. Ibn Hazm wrote:

"The rich are obliged to provide sustenance to the poor living in their region. If they try to neglect or avoid it or deflect from this responsibility, the Head of the State must compel them to part with some of their wealth for the maintenance of the poor and the needy. In case the zakah is not sufficient to satisfy the basic needs of the poor, tax should be levied upon the rich Muslims to provide the poor with enough food, reasonable clothing and accommodation."

The discussion of poverty is highly interrelated with the conceptual understanding of basic needs in the preceding sections. Non-fulfillment of basic needs is in fact a fundamental indicator to the existence of poverty.

In this context, the writer would like to remind that poverty may accrue in a situation where the level of needs increases faster than the income necessary for the fulfillment of basic needs. This may occur from a drastic increase in population (either from birth or immigration), increase in the types of necessities necessary for any particular time and place or due to an increase in the number belonging to particular age groups. The existence of a wide disparity between the rich and the less well-off can compound the severity of the problem when the rich influence the structure, administration, tastes and strategic variables such as the general price level of an economy.

Zakah

Under the discussion of zakah, Ibn Hazm emphasized its obligatory status, simultaneously stressing the role of the wealthy in eradicating poverty among the poor and the indigent. Ibn Hazm wrote that the penalty for those who do not support zakah suffices with the state collecting the zakah due either through voluntary means or through force. And if opposition against zakah still persists, then that person(s) should be fought. If this opposition denies zakah as an obligation, it should be declared murtad (apostate). Whichever way it is, punishment must be meted out to those who still persist in opposing this obligation, either hidden or explicitly.

Ibn Hazm's emphasis on the position of zakah is such that the deceased who should have and have not paid the zakah due during his or her lifetime should have that obligation to be fulfilled from his or her wealth. Such unpaid zakah is a form of debt to Allah (SWT) and those entitled to zakah. And if debts to human beings are required to be settled, what more when it comes to debts owed to Allah (SWT)?

The unpaid zakah is never written off. (This is of course in contrast to some conventional tax provisions which do allow' long-unpaid taxes to be considered as bad debts to the state if the time lapse has by-passed a certain time period). Zakah is different. Regardless of the type of zakah to be paid and regardless of the cause for non-payment of zakah (intentionally-done, delayed collection by the zakah-collectors, ignorance of obligation or otherwise), the zakah debt due is never written off, at least in the sight of Allah (SWT). (This is at least one major difference with conventional tax systems and regulations.)

Taxes

Ibn Hazm was very much concerned with the factor of justice in the tax system. To him, before anything else is considered, the interests of the people must be considered when planning to impose tax compulsorily. The interests of the people must also be considered carefully' in times of collecting taxes because the people are the pool of tax payers. Hence, whatever losses that need to be borne by the people can ultimately affect the (system and amount of) tax collection. This should remind us of discussions in conventional public finance theories pertaining to willingness or propensity to pay taxes.

Ibn Hazm was especially concerned over the nature of the tax collection system. Abusive and exploitative means of collecting taxes must be prevented. Taxes were to be collected by not transgressing the limits of the Shari'ah. Losses to taxpayers (arising from such shortcomings) can mean losses to the state too. This can possibly refer to the fall in the propensity to pay taxes, the lack of public support for the ruling government and the decline in potential tax revenues either arising from unpaid taxes or some of the paid taxes being siphoned by unscrupulous tax collectors.

An account of the tax administration in Andalus during Ibn Hazm's time is recorded by S.M. Imamuddin:

"The lowest branch of the finance department was located in the villages and supervised by a divisional head called 'amil. The harvest being ready, the field was inspected and the value of the produce was estimated by an officer called 'ashshar. There was a mutaqabbil to collect market and other duties within the fiscal area of his qabalah. In order to check these officers from cheating and charging more than the dues, strict vigilance was kept on them.

An accounts register was maintained and census was taken during the time of Yusuf al-Fihri and the bishop Hostages prepared a complete descriptive list of tax and jizyah-payers during the time of Muhammad I and made annual visits to see that the taxes were properly realized.

The rate of land-tax generally varied from V6th to 1I3rd according to the quality of the land. The practice of collecting the tax on cattle in kind was given up by the Ummayyad Amirs but that of land-tax in kind or cash continued. The land-tax collected in kind during the time of Hakam I amounted to 4,700 mudd of wheat and 7,747 mudd of barley. Ali Ibn Hammud (1009-1 018 AD) ordered the people of Jaen to pay the land-tax in cash at the rate of six dinars for a mudd of wheat and three dinars for that of barley instead of paying in kind. Muslims paid zakah at the rate of 2½% on their wealth and young earning members of non-Muslim families paid poll-tax (jizyah) varying from 12 to 48 dirhams a year in monthly installments. There were custom-houses in big and small towns, commercial centers and ports. Idrisi speaks of an office of Rihadrah (the custom-house) at Lorca and Himyari of that at Qalab. Arms, war-horses, books and bridal ornaments were exempted from import duties.

After meeting the expenditure of local administration, the amount of taxes deposited in the local treasury was passed on to the provincial bait aI-mal and from there, the balance was transmitted to the Central headquarters at Cordova which controlled all the treasuries of the country and replenished the coffer of a province which fell short of fund. The taxes collected from the mustakhlas (the royal land) were passed on directly to the Bait al-Nail al-Khas (the royal treasury) for the personal expenses of the ruler. The royal Khas lands accumulated in the provinces due to the confiscation of lands from the nobles from time to time. The administrative head of the royal property was Sahib al-Diya. The annual revenue from these lands and markets alone amounted to 765,000 dinars during the time of 'Abd aI-Rahman III. Some rulers showed due consideration to the tax-payers when they suffered from any natural calamity. Abd aI-Rahman III on his accession to the throne abolished all illegal taxes. Hakam II reduced the military and extraordinary taxes by one-sixth in 975 AD."

Abu' Abd Allah Harith Ibn Asad aI-' Ana,zi al-Muhasibi was born in Basra in 165 AH/781 AD. The name 'Anazi could possibly indicate that he belonged to the Arab Bedouin tribe of' Anaza.

Not many historical records could account for al-Muhasibi's family. However, it has been recorded by his biographers that his father had left at his death, a fortune of about 300 000 dinars for al-Muhasibi. However, because the father was said to have been a Qadari (believer of an unIslamic set of beliefs), al-Muhasibi renounced any inheritance of that wealth and had it handed over to the bait aI-mal.

One confirmed fact was that al-Muhasibi came to Baghdad at an early age with his parents. Baghdad, being the then centre of trade and scholarship in the Muslim world, provided al-Muhasibi with the best available education. This excellent training was to manifest in the future writings, talks and conduct of al-Muhasibi.

Al-Muhasibi's personality is well-illustrated by the title al-Muhasibi with which he is well-known. This title was bestowed due to his practice of frequently examining his conscience, especially during a state of recollection of Allah (SWT).

Al-Muhasibi was a jurist of the Shafi'i school of canon law. He had studied under Imam al-Shafi'i himself. As a theologian, he advocated the use of the 'aql (faculty of reasoning). Initially, he became inclined towards the Mu'tazilites and their rationalism. Eventually, he became among the first to turn against them using the dialectic vocabulary of the Mu'tazilites themselves. However, al-Muhasibi was wrongfully involved with the Mu'tazilites in a general persecution due to Ibn Hanbal's attack on the dialecticians. Although al-Muhasibi had employed the logical and dialectical methods of the Mu'tazilites with the intention of utilizing these methods to oppose the latter, al-Muhasibi's original works and the sufistic tendencies of his teachings caused him to be a suspect during the persecution. This unfair suspicion inevitably forced him to retire from all involvement to teach freely and openly in Baghdad.

This unfortunate landmark of his career was not to blemish the fact that al-Muhasibi was the first Bunni sufi whose works manifest as a complete theological education. He laced sufism with philosophy and theology. His works, both written and taught, combined to produce exact philosophical definitions evolved within the ambit of a rigorous search for increased moral purification. The famed al-Junayd Ibn Muhammad al-Baghdadi was to be a disciple to al-Muhasibi. However, the effect of the suspicion suffered from being unjustly related to the Mu'tazilites' erroneous ways was to persist until al-Muhasibi's demise in 243 AH/857 AD.

Major Works

The works of al-Muhasibi are good examples of distinguishing between the ascetic ways of the Muslim sufi and the Christian monks. Where the latter propagates the life of seclusion and a less active role in the mundane affairs of a community, the teachings of al-Muhasibi are judged to develop the sufi to remain an active member of his community despite his spiritual commitments. The works of al-Muhasibi are also reported to have a greater emphasis on the practical side of the spiritual-life adherent.

Perhaps in an attempt to avoid over-indulgence in solely spiritual conceptualization, in addition to excessive and unnecessary dogmatism in his teachings, al-Muhasibi based his works greatly on his own spiritual experiences. He sincerely believed in sharing with others the way of purification of the soul through the ways that he himself had undergone and found effective. Also perhaps, in an attempt to refute the misconceptions attached to the sufi teachings, he deliberated on the positive aspects of the sufi way of life and the necessity for inner purification (as a prerequisite to a more meaningful and effective role of a Muslim).

The number of al-Muhasibi's works have been claimed by sufi adherents to have reached a total of 200. However, only far smaller proportions are in existence today. A list of a selected few is presented in the appendix to this chapter.

Major Lesson of Economic Relevance

Need for Control of One's Self Interest ...

Being the great sufi that he was, emphasizing on the purification of the inner self, it is thus not surprising that the reminder to control one's self interest appears unexhaustively in many of al-Muhasibi's writings. To al-Muhasibi, one can hope to serve Allah (SWT) in the true sense of the word and in all aspects of his life, only if he has no taint of self interest in his actions and thoughts. Demanding as this may be, al-Muhasibi had never declared that the act of self-purification will be an easy one. However, al-Muhasibi was cautious to remind people in his Kitab al Ri'aya Ii Huquq Allah wa'i Qiyam biha that efforts towards controlling of one's self interest can be hindered through one's association or indulgence (in whatever degree) with matters of sin.

Concept of the Balance (Mizan) ...

In his Kitab al-Tawahhum wa'l-Ahwal, al-Muhasibi enjoined that one must constantly be conscious of ensuring that the balance arising from one's indulgence tilts towards one's benefits. In other words, benefits should always outweigh costs.

In this regard, we should remind ourselves that the Islamic concept of benefits and costs are not limited to those of only the worldly or material forms. There are also the hereafter benefits and costs. Those that can be attained or received only from the hereafter, if ignored, can tilt the mizan towards one's disfavor.

Development of the Homo Islamicus ...

Among other matters, al-Muhasibi's Risalah Adab al-Nufus deliberates in detail on the development of the soul. Al-Muhasibi believed that the self needs constant observation and care. The fundamental values that must be imbued within the self include among others:

Ikhlas (single-mindedness in the service of Allah (SWT));

Thiqah (reliance on Allah (SWT));

Shukr (gratitude);

Humility;

Submissions;

Nasihah (the giving of faithful counsel);

Love of what Allah (SWT) loves and hatred of what He hates;

Muhasabah (self-examination);

Muraqabah (meditation);

Self-discipline; and,

Being knowledgeable of Allah (SWT), Iblis, oneself and the work of Allah (SWT).

The underscoring significance of the above values lies magnified in the Islamic advocation for the replacement of the homo economics or the orthodox economic man with the homo Islamicus or the Islamic man.

Wealth ...

Wealth must not be made the object of one's love (or pursuit). Subsequently, even the desire to accumulate it is abhorred. Alternatively, one should be contented with little. Even if the reason for its accumulation is for use in good works, the act of accumulating wealth can potentially lead to one's preoccupation with mundane affairs. As a result, one's heart cannot be totally disposed for the remembrance and worship of Allah (SWT). Once this occurs, then the ensuing evils of avarice and pride may be seeded in one's heart. Further discussion on this perspective is available in al-Muhasibi's Kitab al-Wasaya.

Earnings ...

A clear exposition of this subject-matter and its related issues is detailed in al:'Muhasibi's Risalah al-Makasib wa'l Wara' wa'l-Shubuhah. Margaret Smith summarised the contents of this work (which has the greatest degree of economic content) in her book, An Early Mystic of Baghdadi:

"In this work, al-Muhasibi modifies the quietest tendencies of certain of his predecessors, and condemns excessive rigorism in the matter of what is dubious, while continuing to advocate the need for abstinence and asceticism. The basic principle in these matters, he teaches, should be reliance upon God (tawakkul), who can be trusted to provide for His creatures, and therefore they have no excuse for recourse to what is unlawful or doubtful in origin. In this connection al-Muhasibi sets forth a fine conception of God as Creator, with discerning knowledge of, and care for, His creatures. Faith in God and the remembrance, with the lips as with the heart, that He is the Sole Provider, the Lord of life and death, and Sovereign over all things, will lead men to this complete trust in Him, and to the observance of His sanctions. But this does not mean that a man should refrain from taking lawful means to earn a livelihood, or live in idleness at the expense of others. The right type of abstinence (wara') is to abstain from what God has prohibited and what is abhorrent to Him of action, whether in word or in deed, and of thought and motive, and what this is can be known by self-examination before proceeding to action.

This work includes an interesting section on the practices of the ascetics and Sufis of al-Muhasibi's time and proceeding times, showing their scrupulous anxiety to refrain from anything including the least taint or possibility of what was unlawful. Some, he says, betook themselves to the mountains and the valleys, and gathered tamarisk leaves and what could be picked up in the way of seeds and pulse and herbs, which had a value if stored, and these they collected in summer for use in wi1?ter. Others chose to exist on windfalls and fresh herbs and grass and such vegetation as was to be found growing wild, when hunger drove them to eat. Some were content with what had been thrown away, while another group preferred to beg for food. Some ascetics living in the regions of Syria used to glean what they could of corn and barley, following the reapers, but this, al-Muhasibi notes, was not a practice in his time. He refers also to those who would not glean behind the reapers on land bought with money wrongfully acquired, or land bestowed by the Government upon "its supporters, or consisting of estates of which the rightful owners had been despoiled. Others, again, chose to earn a living by manual labor, or by taking up the sword in the service of God, in preference to gleaning at the harvest, because the latter procedure had no precedent under the rule of the first four Imams, and these were agreed upon fighting under the banner of every Commander of the Faithful, whether good or bad. Others chose to retire into a monastery and live there in seclusion, unless there was a call for the services of Muslims, on account of the advance or invasion of some enemy into the territory of Islam, and in these circumstances, it was obligatory for them to wield the sword,' but when the need had passed, and the community no longer required their services, they would retire once more into the monastery they had established, holding that it was the more excellent way. This group among the Sufis, al-Muhasibi considers to be much in error.

He deals also with the question of buying and selling and what is to be considered lawful or unlawful for the servant of God in this respect, and quotes the case of those who considered that to buy a knife, or wood to serve as fuel for cooking, from the Government, was unlawful, and so also was the purchase of a leather whip or a whetstone from a Christian. Others disliked trading with women for thread (the twisting of thread being done by women), or for a rosary, lest it should mean temptation to look upon what was unlawful.

Al-Muhasibi deprecates bigotry and fanaticism and the attitude of those who would starve rather than partake of what did not seem to them lawful, and points out that this extremist view had brought some to the loss of reason and to suicide. The right road to follow, he thought, was that of scrupulous abstinence from what was known to be unlawful, after self-examination in order to be sure in the matter, and trust in God that He would not fail to provide all that was necessary for His creatures, who need to have recourse to what was unlawful or to extreme fanaticism in the search for the lawful, which was in itself unlawful".

Zuhd (Abstinence) ...

In his Kitab al-Masa'il fi Zuhd wa Ghayriha, al-Muhasibi discussed the subject of zuhd. To him, it may be necessary at times to abstain from what is right (in itself) because it may become the cause for something which is wrong. However, al-Muhasibi did not believe in abstinence of extreme degrees.

"... what is wrong must be renounced without hesitation, whether it be in thought or word or deed, and much that is doubtful must be renounced, even if right in itself, because it may lead to wrong, but what is right and, as the result of investigation and self-examination, is seen to be in accordance with the Will of God, should not be renounced from mere scrupulosity, for such abstinence may lead to injury to health or reason and risk to life, find abstinence of this kind is itself unlawful and a sin against God".

Al-Muhasibi is reported to have written:

"The believer who is seeking for godliness ...renounces all that is destructive to him in this world and the next, and leanness is manifest in him", and mortification and solitude and separation from the companionship of the pious, and the appearance of grief and absence of joy, and he chooses all that, hating to indulge in pleasure which may incur the wrath of his Lord and make him worthy of His chastisement, and he hopes that his Lord will be well pleased with what he does, and that he will be saved from chastisement, and will be permitted to come into His presence and to taste of the joys of Paradise, unalloyed and unabated, and to abide therein to eternity, enjoying the good pleasure of his Lord, the All Gracious and All Glorious".

Al-Muhasibi's opinion on zuhd should enlighten a more objective commitment rather than a "fanatical" occupation on the concept of zuhd. Al-Muhasibi qualified the concept well and directly portrayed the zahid (the person practicing zuhd) as one who has a sound set of criteria in determining which forms of abstinence qualify as an Islamically acceptable form of abstinence. To a substantial extent, this dissolves the initially perceived counter productive image created by al-Muhasibi's sufi-based opinion on the accumulation of wealth, stated earlier. What is actually propagated by al-Muhasibi is the highly cautious, meticulous and controlled relationship between a person and his wealth, not a rampant and uncontrolled liberal attitude towards it.

Saturday, September 12, 2009

It is the task of the scholars to refer to the Islamic sources to obtain Islamic norms on economic issues and to find out solutions consistent with these norms. This has happened throughout Islamic history according to the need of the time and space, and has produced a rich heritage of Islamic literature covering all aspects of human life including economic issues and other matters having implications for economic behavior.

Economic issues have been addressed from different perspectives by various authors in the context of different disciplines and in response to the needs of respective times in the Islamic history. Five different dimensions of analysis may broadly be identified.

First, discussions related to economic matters in the discipline of Tafsir (exegesis), which is the explanation of the divine book Al-Qur'an. The Qur'anic verses related to economics have been explained by mufassirin (personalities doing exegesis) as an integral part of the Qur'anic code of human life. A good number of books of Tafsir is available containing discussions on relevant economic matters. For instance, discussions on the prohibition of interest,1 encouragement of economic activities for human welfare,2 and so on.

Second, discussions of economic issues in the discipline of Fiqh (Islamic jurisprudence). The legal aspects of economic problems, along with other Shari'ah matters, have been analyzed by the great jurists of Islam in the books of Fiqh. For example, the legal aspects of mudarabah and musharakah have been dealt with in this discipline in some great detail.3

Third, the great Islamic personalities discussed economic matters in the context of ethical system of Islam for moral development. This analysis is different from the juristic analysis of economic matters in that the latter presents the legal status and limits while the former emphasizes the real spirit of Islam over and above legal limits, guiding man towards the most desirable economic behavior of human beings. The works of ulama, sufis, Islamic philosophers and Islamic reformers (mujaddidin) come under this category.

The central focus of Imam al-Ghazali (1058-1111 AD), a great philosopher and sufi (Islamic mystic), was Islamic philosophy and Islamic ethical values, which compass all dimensions of life including economics. As such his discussion of economic issues emerge in the ethical perspective of human life as a. whole, rather than a segregated value-neutral discipline as it appears in the contemporary economic analyses and systems. Hence his analysis is generally normative rather than positive in nature.

Al-Ghazali was writing in the 11th and early 12th centuries which were roughly six centuries before the emergence of Mercantilism and seven centuries before Physiocracy and Adam Smith (1723-1790), that is, roughly six to seven centuries before the beginning of economics as a discipline. Even then, it is interesting to note that al-Ghazali's writings contain a good number of economic ideas, although discussed in the ethical normative perspective.

Life and Time

Born in 1058 in a village called Ghazalah of northern Iran, Abu Hamid Muhammad al-Tusi al-Ghazali was a great Islamic scholar in a number of subjects including philosophy, sufism, theology and jurisprudence. A son of a poor but righteous spinner, he lost his father at a young age and began study with his father's sufi leader and friend, then joined a madrasah (a religious institution), and gained knowledge from several reputed scholars of the time. His reputation as a scholar made Nizam al-Mulk al-Tusi to appoint him to the Chair of Theology at the Nizamiyyah College of Baghdad in 1091 at his age of 34. Although highly successful in teaching, drawing even the jurists in his classes, he left the college in 1094, performed hajj (pilgrimage), traveled places to meet great Islamic personalities, and devoted to Sufism when he also got time for writing. Although he took up teaching positions.

The present paper is based on this classic work of al-Ghazali, the Ihya 'Ulum ai-Din, which provides a mirror image of his scholarship and personality and contains several chapters ("kitab" in his terminology) on subjects related to economics.

Economic Philosophy

Underlying every-economic system there is a philosophy, and so is the Islamic economic system. Although economics did not emerge as a system as yet, al-Ghazali's philosophical and intellectual mind did not fail to put Islamic economic thought in its proper philosophical perspective.

The philosophy underpinning al-Ghazali's analysis of economic pursuit is that economic achievement is a means to the end, and not an end in itself. Wealth is a means to the success in the eternal life. Implicit in this is the philosophy of life embodied in the concepts of tawhid (the unity of Allah), akhirah (the hereafter) and risalah (the institution of Prophethood), and also explicitly mentioned elsewhere in his works.

Place and Benefit of Economic Activity

Al-Ghazali has written a full section, as indicated above, to show the significance, importance and benefit of economic activity and earning. Economic activity for halal (permitted) earning has a religious status, provided one follows the Islamic norms of economic activity and the objective is good, and not for pride and accumulation. He substantiated this by quoting from the Qur'an, the traditions of the Prophet (SAW) and the traditions of other Islamic personalitiesl4. The major points may be summarized as follows. First, Allah (SWT) has provided resources for the benefit of mankind and so they should work to earn them, use them, and express the gratitude of Allah (SWT). Second, economic pursuits in order to be free from the dependence on others, and to fulfill one's own need, the need of the family, need of parents, neighbors and relations, and to satisfy other Islamic obligations are considered efforts in the way of Allah (SWT), which will have high status in the hereafter, provided Islamic norms of earning have been followed. Third, economic pursuits for accumulation of wealth, pride, and for spending in undesirable things are considered as efforts in the Way of the devil. That is, the means and objectives of economic activities should be Islamically permitted and desirable.

Al-Ghazali has clarified the doubts arising from such sayings which seem to discourage economic pursuits.15 According to him, economic pursuits are condemned if their objective is to get more than needed for the accumulation of wealth and its hoarding, and not to spend in goodness and charity. This is because its implication is to make the world as one's objective, which is the root of all evils. Even worse, if one resorts to cheating, oppression and other malpractices to make money. On the other hand, if the objective is to be independent of others, meeting the needs of the life for himself and family, and to spend in goodness and charity, then the economic pursuit is better than abstinence from it.

Need for The Knowledge of Islamic Economics

Al-Ghazali included the knowledge of economic matters into the obligatory knowledge mentioned in the Prophetic tradition, "Seeking of knowledge is obligatory (fard) on every Muslim". If economic activity is encouraged so much so that it has a status of worship, its knowledge is also necessary, "Know that acquiring knowledge in this Bab (in the field of economics) is wajib (compulsory) on every earning Muslim ". This is because one must know how to deal with a problem when it arises, lest he might get himself involved in what is not allowed. One should not wait to ask around when he encounters a problem. If he does so, there is a likelihood to do what he is not supposed to do. Therefore, every earning Muslim should have the basic knowledge of the matter. In his support, al-Ghazali presents the practice of' Umar, the second caliph, who used to visit the market places and say, "He should not do business in our markets that does not have its knowledge".

It seems from his discussion that al-Ghazali is concerned with the Islamic rules of economic activity which are Islamic legal norms and values of economic activities, and are the subject of Islamic jurisprudence, discussed in the chapter of mu'amalat (socio-economic activities). In the contemporary literature, Islamic economics includes Islamic legal norms and their economic analysis. Therefore, according to al-Ghazali, the basic knowledge of Islamic economics is compulsory on every economically active Muslim to the extent of basic Islamic legal norms relevant for his activity, whether it is obtained from Islamic economic literature or from the juristic sources, through study, reading or discussion with the persons of knowledge. Such obligatory knowledge of economic activities is of many kinds (branches), of which six must be acquired by those who are involved in such activities. These are bai' (trade and commerce), riba (interest, usury), salam (forward buying), ijarah (renting), musharakah (partnership) and mudarabah (sleeping partnership for profit sharing). Al-Ghazali discussed all of them

Bai' (Trade)

Following the tradition of Fiqh literature, al-Ghazali analysed three elements (arkan) in bai': (1) the two transacting parties, the buyer and the seller; (2) the items of exchange, the goods and services; and (3) the statement of contract. This classification proves his analytical insight and perception of economics.

Al-Ghazali discussed the juristic eligibilities of persons for valid transaction. Transaction with any man or woman is valid provided the person is not minor, insane, blind or slave. The transaction of minor and insane persons is invalid because they are not mukallaf. Although a blind person is a mukallaf, he or she is unable to see the item of transaction and hence his/her transaction is invalid. If, however, the blind person appoints a wakil (representative or agent) to act on his behalf, the transaction will be valid. Arms (weapons) cannot be transacted with a non-Muslim if he comes from dar al-harb (a country in the condition of war, or a non-Muslim country).

There are six conditions for a mubi' (an item of exchange) to be eligible from Shari'ah point of view for a valid exchange. First, the item of exchange should not be impure in itself, such as dog, pig, alcohol and so on. Those items which are not impure in themselves and are useful may be exchanged. Second, the items of exchange should be useful and beneficial. On this score, snakes and rats may not lawfully be exchanged. Third, the seller should be the owner of the items of sale, or be permitted by the owner to sell them. A person is not allowed to sell even his spouse's or children's items in the expectation that they will not object to it. Fourth, the item of sale must be transferable in a Shari'ah approved manner. For example, milk in udder and fish in the water may not be sold because of the mixing of the sold and unsold items. Similarly a mortgaged item may not be sold by the owner, because it is not transferable from Shari'ah point of view until it is released from the mortgage. Fifth, the item of sale must be known with certainty, and also its quality and quantity. Sixth, the item of sale must be in the possession of the seller.

In his Prolegomena (The Muqaddimah), 'Abd al-Rahman Ibn Muhammad Ibn Khaldun al-Hadrami of Tunis (A.D. 1332-1406), commonly known as Ibn Khaldun, laid down the foundations of different fields of knowledge, in particular the science of civilization (al-'umran). His significant contributions to economics, however, should place him in the history of economic thought as a major forerunner, if not the "father," of economics, a title which has been given to Adam Smith, whose great works were published some three hundred and seventy years after Ibn Khaldun's death. Not only did Ibn Khaldun plant the germinating seeds of classical economics, whether in production, supply, or cost, but he also pioneered in consumption, demand, and utility, the cornerstones of modern economic theory.

Before Ibn Khaldun, Plato and his contemporary Xenophon presented, probably for the first time in writing, a crude account of the specialization and division of labor. On a non-theoretical level, the ancient Egyptians used the techniques of specialization, particularly in the era of the Eighteenth Dynasty, in order to save time and to produce more work per hour. Following Plato, Aristotle proposed a definition of economics and considered the use of money in his analysis of exchange. His example of the use of a shoe for wear and for its use in exchange was later presented by Adam Smith as the value in use and the value in exchange. Another aspect of economic thought before Ibn Khaldun was that of the Scholastics and of the Canonites, who proposed placing economics within the framework of laws based on religious and moral perceptions for the good of all human beings. Therefore all economic activities were to be undertaken in accordance with such laws.

Ibn Khaldun was cognizant of these ideas, including the one relating to religious and moral perceptions. The relationship between moral and religious principles on one hand and good government on the other is effectively expounded in his citation and discussion of Tahir Ibn al-Husayn's (A.D. 775-822) famous letter to his son 'Abdallah, who ruled Khurasan with his descendants until A.D. 872. From the rudimentary thoughts of Tahir he developed a theory of taxation which has affected modern economic thought and even economic policies in the United States and elsewhere.

Labor Theory of Value, Economics of Labor, Labor as the Source of Growth and Capital Accumulation

With the exception of Joseph A. Schumpeter, who discovered Ibn Khaldun's writings only a few months before his death, Joseph J. Spengler, and Charles Issawi, major Western economists trace the theory of value to Adam Smith and David Ricardo because they attempted to find a reasonable explanation for the paradox of value. According to Adam Smith and as further developed by David Ricardo, the exchange value of objects is to be equal to the labor time used in its production. On the basis of this concept, Karl Marx concluded that "wages of labour must equal the production of labour" and introduced his revolutionary term surplus value signifying the unjustifiable reward given to capitalists, who exploit the efforts of the labor class, or the proletariat. Yet it was Ibn Khaldun, a believer in the free market economy, who first introduced the labor theory of value without the extensions of Karl Marx.

Before we go into the details of his ideas on Islamic economics, it would be useful to consider in brief the socio-political and economic conditions of the time, for, it is likely to have influenced his thinking. Ibn al Qayyim lived in the times of Sultan Nasir Muhammad b. Qalawun (1293-1341 AD) who was able to establish a relatively stable government and pay attention to the improvement of educational and economic conditions of the country. He effected a comprehensive redistribution of land and made reforms in the taxation systems. There was a number of schools and libraries in the Mamluk period. The 'ulama had great influence on the Sultan and the people.

An important aspect of the period was the widespread cults of Sufism and taqlid (following and supporting opinions of a particular Imam). Ibn al-Qayyim was well versed in all the main disciplines of the time. He was the most famous pupil of Shaikh aI-Islam Ibn Taimiyyah (1253-1328 AD).

Economic Philosophy of Islam

Ibn al-Qayyim has laid special emphasis on the following points:

Homo Islamicus and Not Homo Economicus

Ibn al-Qayyim highlights the basic Islamic faith that every man is accountable before Allah (SWT) for his conduct and that Allah (SWT) is the source of guidance and direction. Ibn al-Qayyim emphasizes the Islamic view that this life is a test and a trial. This test and trial is administered by Allah (SWT) through awarding riches as well as through taking them away. The possession of wealth is not a proof of Allah's favor, nor is lack of it a disfavor. Wealth is not meant for mere enjoyment, which is a level on which beasts live.

Justice

According to Ibn al-Qayyim, justice "(adl) is the objective of the Shari'ah. In fact, the Shari'ah comprises justice, blessing and wisdom. Anything contrary to justice which turns the matter from blessing and welfare into a curse and an evil, and from wisdom into disutility has nothing to do with the Shari'ah.

Values and Their Impact on Economic Life

After describing the Islamic view that it is required of people to adopt values like God-fearing, piety, virtue, honesty, truth, and to keep them away from evils like falsehood, fraud, corruption, Ibn al-Qayyim states that the natural corollary of falsehood is corruption and that success cannot be achieved in the worldly life and the hereafter by means of corruption. It is injurious to economic life as well as to the other aspects of worldly life. The consequences of falsehood are well-known.

Shedding light on the bad consequences of disobedience and social evils, he writes elsewhere that the effects of sins are vicious and condemnable. These are injurious to body and soul, which causes damage to this world and the life after death. He argued that one of the obvious effects is deprivation from livelihood. He supports his opinion with a Hadith of the Holy Prophet (SAW) saying that sin causes a decrease in man's livelihood. On the contrary, God-fearing piety and good deeds cause increase in livelihood and success in economic matters and in the hereafter.

The evils like falsehood, fraud, jealousy, exploitation and dishonesty create chaos, suspicion, instability and frustration in the society and hinder economic progress. On the contrary, the absence of these evils and the presence of Islamic values create an atmosphere of confidence and security in the society that will lead to cooperation in production and stability in economic condition. These positive Islamic values are expected to increase production and general prosperity.

Ibn Taimiyyah's full name is Taqi aI-Din Ahmad bin 'Abd al-Halim. He was born in Harran on 22 January, 1263 AD (10 Rabi' al-Amwal, 661 AH). His family had long been renowned for its learning. His father' Abd al-Halim, uncle Fakhr aI-Din and grandfather Majd aI-Din were great scholars of Hanbalite jurisprudence and the authors of many books. Endowed with a penetrating intellect and a wonderful memory, Ibn Taimiyyah studied at an early stage all the disciplines of jurisprudences, traditions of the Prophet, and commentaries of the Qur'an, mathematics and philosophy and in each he was far ahead of his contemporaries. Among his teachers was Shams aI-Din al-Maqdisi, first Hanbali Chief Justice of Syria following the reform of the judiciary by Baibars.

Just Price, Market Mechanism and Regulation

Just Price

The Qur'an lays great emphasis on justice. It was quite natural to apply the idea to market relations, especially to prices. Thus the Prophet, peace be upon him, characterized riba as overcharging a trusting customer.

A just or fair price is mentioned in some traditions from the Prophet in the context of compensation due to an owner, for example, in the case of a master who frees part of a slave. The slave becomes a free man and the master is compensated for the remaining part at a fair price (qumah al-'adl). The same term occurs in a report about the second Caliph 'Umar bin Khattab, fixing a new value for blood money (diyah) after the purchasing power of the dirham fell due to a rise in prices. The notion of a just or fair price is also found in one of the state letters of the fourth Caliph, 'Ali bin Abi Talib.

Jurists who codified Islamic rules about business transactions, applied to concept in case a defective object is sold, in case of usurpation, forcing a hoarder to sell his goods, overcharging, disposal of the property of a trust, etcetera. Generally, they thought that the just price of something is that price which is paid for similar objects in a given time and place. Therefore} they preferred to call it the price of the equivalent (thaman al-mithl).

Though the notion of a just or fair price was present in Islamic jurisprudence since the earliest times, Ibn Taimiyyah seems to be the first Islamic scholar to have paid .it special attention.